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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-13970
CHROMCRAFT REVINGTON, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1848094
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1100 North Washington Street, Delphi, IN 46923
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(Address, including zip code, of registrant's principal executive offices)
(765) 564-3500
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class exchange on which registered
---------------------------- ----------------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of February 15, 2001, there were 9,573,248 shares of the registrant's
common stock ($.01 par value) outstanding. The aggregate market value of the
voting stock held by nonaffiliates of the registrant as of February 15, 2001
was $38.6 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the annual shareholders meeting to be held
May 1, 2001 are incorporated by reference into Part III.
INDEX
Page Number
PART I -----------
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of Security Holders . . . 6
Executive Officers of the Registrant . . . . . . . . . . . . . . . 6
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 8
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . . . 11
Item 8. Financial Statements and Supplementary Data . . . . . . . 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 11
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . 11
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 13. Certain Relationships and Related Transactions . . . . . . 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART I
Item 1. Business
-----------------
General
Chromcraft Revington, Inc. ("Chromcraft Revington"), incorporated in 1992
under the laws of Delaware, is engaged in the design, manufacture and sale of
residential and commercial furniture through its wholly-owned subsidiaries,
Chromcraft Corporation ("Chromcraft"), Peters-Revington Corporation ("Peters-
Revington"), Silver Furniture Co., Inc. ("Silver Furniture"), Cochrane
Furniture Company, Inc. ("Cochrane Furniture") and Korn Industries,
Incorporated ("Korn Industries"). Chromcraft Revington is headquartered in
Delphi, Indiana.
In 1992, Chromcraft Revington acquired all of the outstanding common stock of
Chromcraft and Peters-Revington from Consolidated Furniture Corporation
(formerly Mohasco Corporation) pursuant to merger agreements. Concurrently,
Chromcraft Revington completed its initial public offering and restructured
its long-term debt. Chromcraft Revington had no operations prior to 1992.
Chromcraft, located in Senatobia, Mississippi, manufactures casual dining and
commercial furniture. Peters-Revington, located in Delphi, Indiana,
manufactures occasional furniture. Chromcraft and Peters-Revington were both
founded in 1946.
On April 3, 1995, Chromcraft Revington acquired Silver Furniture, a
manufacturer and importer of occasional furniture. Silver Furniture has
manufacturing and warehousing operations in Knoxville, Tennessee. On November
8, 1996, Chromcraft Revington acquired Cochrane Furniture, a manufacturer of
dining room, bedroom and upholstered furniture. Cochrane Furniture has
manufacturing facilities in Lincolnton and Warrenton, North Carolina. On
September 2, 1999, Chromcraft Revington acquired Korn Industries, based in
Sumter, South Carolina. Korn Industries manufactures and sells bedroom and
dining room furniture through its Sumter Cabinet Company ("Sumter Cabinet")
division.
On December 22, 2000, Chromcraft Revington received a proposal from Court
Square Capital Limited ("Court Square Capital"), a unit of Citigroup, under
which the holders of Chromcraft Revington's publicly traded shares would
receive cash of $10.30 per share in a transaction to take Chromcraft Revington
private. The offer is contingent upon the execution of a definitive merger
agreement, confirmatory due diligence and the approval of Chromcraft
Revington's board of directors and stockholders. Court Square Capital owns
5,695,418 shares, or 59.5%, of Chromcraft Revington's common stock at December
31, 2000. An independent committee of Chromcraft Revington's board of
directors is evaluating the proposal and has engaged ING Barings, LLC as its
financial advisor to assist the committee in regard to the proposal.
Chromcraft Revington and its subsidiaries have several operating segments
which are aggregated into one reportable segment, in accordance with Financial
Accounting Standards Board Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information." No material amount of Chromcraft
Revington's sales is dependent upon a single customer. Sales outside of the
United States represent approximately 1% of total sales.
Products and Distribution
Occasional Furniture
Medium-priced occasional furniture, including tables, bookcases, entertainment
centers, library and modular wall units, curio cabinets and home office
furniture in traditional, contemporary and country styles, are manufactured
and sold under the Peters-Revington brand name. Occasional furniture is
manufactured primarily from American hardwoods, such as oak, cherry and maple.
Many Peters-Revington table collections include twelve or more pieces in
matching styles. In addition, different pieces of occasional furniture
2
incorporate the same design and styling themes, thereby enabling consumers to
coordinate furniture for the same room. Peters-Revington's furniture is sold
in the United States and Canada through independent sales representatives
primarily to independent furniture retailers.
Entry level-to-medium priced occasional tables and entertainment centers are
designed, manufactured, imported and sold under the Silver Furniture brand
name. These products are generally designed with a contemporary appeal,
utilizing special finishes and unique styling. Silver Furniture tables are
constructed using a variety of materials, including wood, medium-density
fiber board, glass and metal. Internally designed imported occasional tables
and parts are sourced mainly from factories located in the Far East and Mexico.
Silver Furniture occasional furniture is sold primarily in the United States
and Canada through company sales personnel to national and regional furniture
retailers and through independent sales representatives to independent
furniture retailers.
Bedroom Furniture
Solid wood bedroom furniture, primarily in oak, cherry, ash or maple, is
manufactured and sold at medium price points under the Cochrane Furniture
brand name and at mid-to-higher price points under the Sumter Cabinet brand
name. Bedroom furniture includes beds, dressers, night stands, entertainment
armoires and mirrors primarily in traditional styling. Cochrane Furniture and
Sumter Cabinet bedroom furniture is sold through independent sales
representatives to regional and independent furniture retail stores.
In 1999, Silver Furniture began selling bedroom furniture imported from the
Far East. Silver Furniture's bedroom furniture is designed internally, mainly
in traditional styling, and is sold primarily at medium price points through
company sales personnel to national, regional and independent furniture
retailers.
Dining Room Furniture
Casual dining furniture is manufactured and sold under the Chromcraft brand
name. Casual dining furniture is designed for use in dining rooms, family
rooms, recreation rooms, kitchens and apartments without formal dining areas.
The product line consists primarily of coordinated dining suites in a
contemporary or traditional style that include tables with laminated, wood or
glass table tops, stationary and tilt-swivel chairs, pedestal chairs and
barstools. Chairs are upholstered in a variety of fabrics and vinyls, while
tables are manufactured from metal, wood, glass, faux marble and other
materials, and come in a variety of shapes. Chromcraft competes at the
medium-to-higher price points in casual dining. Chromcraft's casual dining
furniture is sold in the United States through company sales personnel and
independent sales representatives to national, regional, independent and
specialty dining retail furniture stores.
Dining room furniture, primarily in oak, cherry, ash or maple, is manufactured
and sold at medium price points under the Cochrane Furniture brand name and at
mid-to-higher price points under the Sumter Cabinet brand name. Dining room
furniture includes a broad line of tables, armed and side chairs, buffets,
chinas and serving pieces, mainly in traditional or country styling. Cochrane
Furniture dining room tables are offered in solid wood or a high pressure
laminate table top. Sumter Cabinet dining room tables feature solid wood
tops, leaves, and legs. Dining room furniture is sold primarily in the United
States through independent sales representatives to regional and independent
furniture retail stores.
Upholstered Furniture
Upholstered sofas, chairs and ottomans are manufactured and sold under the
Cochrane Furniture brand name. Upholstered furniture is styled in traditional
or contemporary patterns in a wide selection of fabrics using a heat tempered
coil seat construction to evenly distribute body weight. Cochrane Furniture
uses primarily hardwoods in the construction of its furniture frames. Seat
cushions are made with high-density, high-resilience polyurethane foam, wrapped
in polyester fiber for consistent comfort. Cochrane Furniture's upholstered
furniture is sold primarily at medium price points. Upholstered furniture is
sold through independent sales representatives primarily to independent
furniture retail stores.
3
Commercial Furniture
Commercial furniture, sold under the Chromcraft brand name, includes stationary
and tilt-swivel office chairs, conference and meeting room tables and lounge-
area seating products for airports and other public waiting areas. Chairs are
offered in both contemporary and transitional styles and are upholstered in
various grades and colors of fabric or leather. They include executive models
with high backs, management models, ergonomic computer task chairs and
secretarial models with no arm rests. Products are sold through company sales
personnel and independent sales representatives to office product dealers,
wholesalers/distributors and various contract customers.
Manufacturing
Manufacturing operations include cutting, shaping, sanding, finishing and
final assembly of wood furniture, metal fabricating, plating, powder-coat
painting, chair foam production for casual dining furniture and cutting and
sewing of upholstery fabric. Cochrane Furniture and Sumter Cabinet also have
rough mill operations and woodworking plants which process green lumber into
parts for internal use.
Raw Materials
Major raw materials are wood, steel, fabrics, glass, medium-density fiber
board, wood finishing materials, cartons, foam for cushions and paddings and
mechanisms. Suppliers are selected for their ability to deliver high quality
products on a timely basis and at competitive prices. Chromcraft Revington
believes that supplies of raw materials are available in sufficient quantities
from an adequate number of suppliers. No significant shortages of raw
materials were experienced during 2000.
Inventory and Seasonal Requirements
Chromcraft Revington maintains a finished goods inventory for occasional,
dining room and bedroom furniture in order to respond quickly to customer
delivery needs. Most casual dining, upholstered and commercial furniture is
made to customer specifications and, therefore, not carried in stock. A
limited number of casual dining, upholstered and commercial furniture items
are maintained for quick delivery programs. Sales have historically not been
subject to material seasonal fluctuations.
Competition
Chromcraft Revington encounters domestic and import competition in the sale of
all its products. Many of Chromcraft Revington's competitors, some of which
are larger and have greater financial resources, produce a number of products
which are not competitive with Chromcraft Revington's products. In many cases,
such companies do not disclose the portion of their sales attributable to
products similar to those manufactured by Chromcraft Revington. It is,
therefore, impractical to state with any certainty Chromcraft Revington's
relative position in a particular product line. Competition in Chromcraft
Revington's products is in the form of the quality of its products, service and
selling prices.
Backlog
Chromcraft Revington's backlog of sales orders was approximately $22.1 million
at December 31, 2000, as compared to approximately $27.0 million at December
31, 1999. Order backlog at any particular time is not necessarily indicative
of the level of future shipments.
4
Environment
Chromcraft Revington believes it is in compliance in all material respects
with all federal, state and local environmental laws and regulations which
impose limitations on the discharge of pollutants into the air and water, and
establish standards for the treatment of hazardous wastes.
Employees
Chromcraft Revington employs a total of approximately 2,400 people.
Production employees at Silver Furniture's Knoxville, Tennessee
location are represented by a labor union under a collective
bargaining agreement. Chromcraft Revington considers its relations
with its employees to be good.
Item 2. Properties
-------------------
The following table summarizes Chromcraft Revington's facilities as of
December 31, 2000.
Square Type of Owned/
Location Feet Operations Furniture Leased
------------- ------- -------------- -------------- --------------
Delphi, IN 519,000 Manufacturing/ Occasional Owned
warehousing
Knoxville, TN 160,000 Manufacturing/ Occasional Owned
warehousing
Knoxville, TN 117,000 Warehousing Occasional Leased
(expires 2001)
Lincolnton, NC 368,000 Manufacturing/ Dining room/ Owned
warehousing bedroom
Lincolnton, NC 152,000 Manufacturing Upholstery Owned
Lincolnton, NC 159,000 Manufacturing/ Upholstery Owned
warehousing
Senatobia, MS 560,000 Manufacturing/ Casual dining/ Leased
warehousing commercial (expires 2061)
Sumter, SC 521,000 Manufacturing/ Dining room/ Owned
warehousing bedroom
Warrenton, NC 166,000 Manufacturing Dining room/ Owned
bedroom
Chromcraft Revington also leases trucks, trailers and other transportation
equipment and showroom facilities in High Point, North Carolina and Chicago,
Illinois. Management believes the properties and equipment of its subsidiaries
are well maintained, in good operating condition and adequate to support
present operations.
5
Item 3. Legal Proceedings
--------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
Not applicable.
Executive Officers of Chromcraft Revington, Inc.
------------------------------------------------
Michael E. Thomas President, Chief Executive Officer and Director since
(age 59) Chromcraft Revington's organization in 1992. Mr. Thomas
is a director of TEU Holdings, Inc., the parent company of
furniture retailer This End Up. TEU Holdings, Inc. and
its subsidiaries filed for bankruptcy in 2000.
Frank T. Kane Vice President-Finance, Chief Financial Officer and
(age 47) Secretary since Chromcraft Revington's organization in 1992.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
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Chromcraft Revington's common stock is traded on the New York Stock Exchange.
The following table sets forth the high and low sales prices of Chromcraft
Revington's common stock, as reported on the New York Stock Exchange.
2000 1999
-------------------- --------------------
High Low High Low
-------- -------- -------- --------
First quarter 10 1/2 7 1/2 17 7/8 14
Second quarter 13 1/2 7 1/2 17 14 1/8
Third quarter 11 9/16 8 14 3/4 11 7/8
Fourth quarter 10 1/16 6 13/16 12 13/16 10 1/8
As of February 15, 2001, there were approximately 53 security holders of
record of Chromcraft Revington's common stock. Chromcraft Revington intends
to retain cash for internal and external growth and development of its business
and currently does not anticipate paying cash dividends. At December 31, 2000,
unrestricted retained earnings available for dividends were $31,911,000.
6
Item 6. Selected Financial Data
--------------------------------
(Dollars in thousands, except per share data)
Year Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
Operating Results
Sales $ 259,402 $ 245,385 $ 236,744 $ 225,629 $ 175,899
Cost of sales 197,165 188,411 176,988 169,802 128,217
--------- --------- --------- --------- ---------
Gross margin 62,237 56,974 59,756 55,827 47,682
Selling, general and
administrative expenses 34,901 34,340 31,964 30,200 24,235
--------- --------- --------- --------- ---------
Operating income 27,336 22,634 27,792 25,627 23,447
Interest expense 2,008 988 739 1,265 221
--------- --------- --------- --------- ---------
Earnings before income tax expense 25,328 21,646 27,053 24,362 23,226
Income tax expense 9,878 8,572 10,794 9,720 9,290
--------- --------- --------- --------- ---------
Net earnings $ 15,450 $ 13,074 $ 16,259 $ 14,642 $ 13,936
========= ========= ========= ========= =========
Earnings per share of common stock
Basic $ 1.59 $ 1.25 $ 1.46 $ 1.28 $ 1.21
========= ========= ========= ========= =========
Diluted $ 1.57 $ 1.22 $ 1.41 $ 1.25 $ 1.19
========= ========= ========= ========= =========
Shares used in computing earnings per share
Basic 9,727 10,448 11,137 11,418 11,474
Diluted 9,847 10,720 11,533 11,755 11,740
Financial Position (December 31,)
Total assets $ 160,092 $ 159,135 $ 129,645 $ 126,144 $ 129,942
Total debt 19,200 26,700 5,400 9,000 20,200
Stockholders' equity 110,245 99,770 97,117 90,906 77,925
Other Data
Depreciation and amortization $ 5,855 $ 4,947 $ 4,534 $ 4,383 $ 3,729
Capital expenditures 4,953 3,630 3,388 2,712 3,060
-----------------------
Cochrane Furniture and Korn Industries are included in Chromcraft Revington's
consolidated financial results from their acquisition dates of November 8, 1996
and September 2, 1999, respectively.
Per share data has been adjusted, where applicable, for the two-for-one common
stock split distributed June 10, 1998.
7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
------------------------------------------------------------------------
General
Chromcraft Revington designs, manufactures and sells residential and commercial
furniture through its wholly-owned subsidiaries, Chromcraft, Peters-Revington,
Silver Furniture, Cochrane Furniture and Korn Industries. Chromcraft
Revington's operating results include the operations of Korn Industries,
acquired September 2, 1999, from the date of its acquisition (see Note 3 to
the consolidated financial statements). Korn Industries manufactures and sells
bedroom and dining room furniture.
The following table sets forth the results of operations of Chromcraft
Revington for the years ended December 31, 2000, 1999 and 1998 expressed as a
percentage of sales.
Year Ended December 31,
-----------------------------------
2000 1999 1998
--------- --------- ---------
Sales 100.0% 100.0% 100.0%
Cost of sales 76.0 76.8 74.8
--------- --------- ---------
Gross margin 24.0 23.2 25.2
Selling, general and
administrative expenses 13.5 14.0 13.5
--------- --------- ---------
Operating income 10.5 9.2 11.7
Interest expense .7 .4 .3
--------- --------- ---------
Earnings before income tax expense 9.8 8.8 11.4
Income tax expense 3.8 3.5 4.5
--------- --------- ---------
Net earnings 6.0% 5.3% 6.9%
========= ========= =========
2000 Compared to 1999
Consolidated sales for the year ended December 31, 2000 increased 5.7% to
$259,402,000 from $245,385,000 reported in 1999. The sales increase was due
to higher shipments of bedroom and commercial furniture, partially offset by
lower occasional, dining room and upholstered furniture sales. Bedroom
furniture shipments were boosted in 2000 from the Korn Industries acquisition.
Sales in 2000 were negatively impacted by the U.S. economic slowdown.
Chromcraft Revington's consolidated sales orders began to slow at the end of
the second quarter of this year as compared to 1999. Weak retail conditions
continued for the remainder of 2000. Occasional and dining room furniture
shipments were also lower due to several major retailer bankruptcies and
increased import and domestic competition. Higher commercial furniture
shipments in 2000 were due, in part, to increased airport gate lounge seating
and an improved office furniture market. Selling prices for 2000 were slightly
higher as compared to the prior year.
Gross margin increased to $62,237,000, or 24.0% of sales, in 2000, from
$56,974,000, or 23.2% of sales, in 1999. The higher gross margin percentage
in 2000 was primarily due to lower material costs and improved manufacturing
efficiencies. The lower material costs were due, in part, to sourcing of
furniture components from low-cost suppliers in the Far East. The inclusion
of Korn Industries' operating results for the full year 2000 partially offset
the gross margin percentage increase.
Selling, general and administrative expenses increased $561,000 to $34,901,000,
or 13.5% of sales, in 2000 from $34,340,000, or 14.0%, in 1999. Bad debt
expense increased $1,322,000 in 2000 as compared to 1999 primarily due to the
bankruptcy of a major furniture retailer. The inclusion of Korn Industries'
operating results in 2000 partially offset the selling, general and
administrative expense percentage increase due to higher bad debt expense.
The higher expense percentage in 1999 was due to a $1,000,000 charge for
employee termination and severance costs at Chromcraft.
8
Operating income for 2000 increased $4,702,000 to $27,336,000 from $22,634,000
in 1999. The increase in operating income was primarily due to the Cochrane
and Korn Industries subsidiaries.
Interest expense for the year ended December 31, 2000 was $2,008,000 as
compared to $988,000 for the prior year period. The increase in interest
expense for 2000 was primarily attributable to higher average bank borrowings
due to the Korn Industries acquisition and purchases of common stock under
Chromcraft Revington's share repurchase program. The average interest rate
under the revolving credit facility was about 1% higher in 2000 as compared
to 1999.
Chromcraft Revington's effective income tax rate was 39.0% for 2000 as compared
to 39.6% for 1999. The decrease in the effective tax rate for 2000 was due to
lower state income taxes.
Diluted earnings per share increased to $1.57 in 2000 from $1.22 in 1999. For
the year ended December 31, 2000, shares used in computing diluted earnings per
share decreased 8.1% to 9,847,000 from 10,720,000 for 1999. The share
reduction in 2000 was primarily due to purchases of common stock under
Chromcraft Revington's share repurchase program.
1999 compared to 1998
Consolidated sales increased 3.6% for the year ended December 31, 1999 to
$245,385,000 from $236,744,000 for the year ended December 31, 1998. The
increase in sales was primarily due to higher shipments of bedroom and dining
room furniture, partially offset by lower shipments of upholstered, commercial
and occasional furniture. The increase in bedroom and dining room shipments
was due, in part, to the Korn Industries acquisition, which was completed
September 2, 1999. The decrease in upholstered furniture shipments was
primarily attributable to the repositioning of the product line price points
and styling. Commercial furniture shipments were lower for 1999, as compared
to 1998, due, in part, to a general softening in demand in the office
furniture industry. Shipments of occasional furniture at Silver Furniture
declined principally due to competitive price pressure.
Gross margin was $56,974,000, or 23.2% of sales, in 1999 as compared to
$59,756,000, or 25.2% of sales, in 1998. Factors which contributed to the
decrease in gross margin percentage included: manufacturing inefficiencies at
Chromcraft due to a product mix change and employee attrition resulting from
the tight labor market; unabsorbed fixed overhead due to the lower sales volume
at Chromcraft and Silver Furniture; a $400,000 write down of discontinued
inventory at Chromcraft; and the inclusion of Korn Industries' operating
results.
Selling, general and administrative expenses increased to $34,340,000, or 14.0%
of sales, for 1999 from $31,964,000, or 13.5% of sales, for 1998. The
percentage increase was primarily due to a $1,000,000 charge for employee
termination and severance costs at Chromcraft.
Interest expense increased to $988,000 in 1999 as compared to $739,000 in 1998.
The increase was due to higher average bank borrowings during 1999 attributable
to the Korn Industries acquisition and the refinancing of Korn Industries' bank
indebtedness under Chromcraft Revington's revolving credit facility. Weighted
average interest rates were slightly lower in 1999 as compared to 1998.
Chromcraft Revington's effective income tax rate was 39.6% and 39.9% for the
years ended December 31, 1999 and 1998, respectively. The decrease in the
effective tax rate for 1999 was due to lower state income taxes.
Diluted earnings per share were $1.22 in 1999 and $1.41 in 1998. Average
common shares used in the calculation of diluted earnings per share included
dilutive potential common shares (stock options) of 272,000 in 1999 and 396,000
9
in 1998. Shares used in computing diluted earnings per share decreased 7.0%
for 1999, to 10,720,000, from 11,533,000 for 1998. During 1999, Chromcraft
Revington purchased, under a share repurchase program, 845,500 shares of its
common stock.
Liquidity and Capital Resources
Operating activities provided $16,647,000 of cash for the year ended December
31, 2000, an increase of $1,890,000 from the amount provided in 1999. Cash
generated from operating activities improved in 2000 primarily due to higher
earnings and depreciation and amortization expense partially offset by an
increase in working capital investment. Inventories increased $4,929,000
during 2000 primarily due to the weak retail sales environment. Generally,
inventories are purchased or produced based on internal sales forecasts which
were higher than actual results. Chromcraft Revington adjusted production
levels during the second half of 2000 to begin reducing inventory levels and
expects to further reduce inventories in 2001. Accounts receivable decreased
$4,022,000 during 2000 due to the lower sales in the fourth quarter.
Investing activities used $4,879,000 and $10,971,000 of cash during the years
ended December 31, 2000 and 1999, respectively. Capital expenditures,
primarily for equipment purchases, were $4,953,000 during 2000 as compared to
$3,630,000 during 1999. Chromcraft Revington expects capital expenditures
during 2001 to be below $4,000,000. Investing activities for 1999 include a
cash payment to Korn Industries' stockholders and related acquisition expenses
of $8,525,000 and proceeds from asset disposals of $1,184,000.
Financing activities used $12,475,000 of cash during 2000, primarily to reduce
bank indebtedness and to acquire shares of Chromcraft Revington's common stock.
During 2000, Chromcraft Revington acquired, under its share repurchase program,
568,900 shares of its common stock for $5,086,000.
Cash used in financing activities during 1999 totaled $2,638,000. During 1999,
Chromcraft Revington borrowed $21,300,000 under its bank revolving credit
facility in connection with the Korn Industries acquisition and the
repurchase of Chromcraft Revington's common stock. As part of the acquisition,
Korn Industries' bank indebtedness of $13,517,000 was refinanced with
borrowings under Chromcraft Revington's revolving credit facility. During
1999, Chromcraft Revington acquired, under its share repurchase program,
845,500 shares of its common stock for $12,079,000.
Chromcraft Revington has a revolving credit facility with a commitment level of
$47,500,000 that matures in December 2005. The interest rate under the
facility is based on floating rate indices or a bank prime lending rate. Total
borrowings under the facility were $19,200,000 at December 31, 2000. Unused
capacity under the revolving credit facility, after reduction for outstanding
letters of credit, was $26,051,000 at the end of the year. Under the
revolving credit facility, Chromcraft Revington has the option of increasing
the facility commitment amount from $47,500,00 to $67,500,000. If the
existing bank group elect not to participate in the increase, Chromcraft
Revington can seek other potential lenders to fully commit to the requested
increase.
Management expects that cash flow from operations and availability under the
bank revolving credit facility will continue to be sufficient to meet future
needs. Chromcraft Revington plans to grow its businesses internally and
through acquisitions. Accordingly, Chromcraft Revington plans to retain cash
in the business and currently does not anticipate paying cash dividends on its
common stock. In 2001, absent further acquisitions, Chromcraft Revington
expects to generate excess cash flow from operations, which will be used to
reduce bank indebtedness, to repurchase its common stock, or for general
corporate purposes.
First Quarter 2001 Outlook
--------------------------
Due to the weak retail sales environment, management anticipates that 2001
first quarter sales will be between 15% and 18% below last year's first
quarter sales. Diluted earnings per share for the first quarter of 2001 are
expected to be between $.33 and $.37, as compared to $.49 in 1999.
10
Recently Issued Accounting Standards
------------------------------------
The Financial Accounting Standards Board has issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
FASB Statement Nos. 137 and 138. The Statements apply to all derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The Statements will require Chromcraft
Revington to recognize all derivatives on the balance sheet at fair value. The
Statements are effective for fiscal years beginning after June 15, 2000.
Chromcraft Revington's adoption of these Statements will not have a significant
effect on its results of operations or financial position.
Safe Harbor Statement Under the Private Litigation Reform Act of 1995
---------------------------------------------------------------------
Certain matters included in this Annual Report on Form 10-K are forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be generally
identified as such because the context of the statements includes words such
as "plans," "may," "anticipates," and "expects" or words of similar import.
All forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reported or
expected as of the date of this report. Among the risks and uncertainties
that could cause actual results to differ materially from those reported or
anticipated are (i) general economic conditions, (ii) cyclical nature of the
furniture industry, and (iii) competition in the furniture industry.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------
Borrowings under Chromcraft Revington's bank revolving credit facility bear
interest at a variable rate and, therefore, are subject to changes in interest
rates. The impact of an interest rate change is not considered material.
Item 8. Financial Statements and Supplementary Data
----------------------------------------------------
The financial statements and schedule are listed in Part IV, Items 14(a) (1)
and (2).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
------------------------------------------------------------------------
None.
PART III
Items 10 Through 13.
--------------------
In accordance with the provisions of General Instruction G to Form 10-K, the
information required by Item 10 (Directors and Executive Officers of the
Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management) and Item 13 (Certain Relationships
and Related Transactions) is not set forth herein because Chromcraft Revington
intends to file with the Securities and Exchange Commission a definitive Proxy
Statement pursuant to Regulation 14A not later than 120 days following the end
of its 2000 fiscal year, which Proxy Statement will contain such information.
The information required by Items 10, 11, 12 and 13 is incorporated herein by
reference to such Proxy Statement.
11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------
(a) 1. and 2. List of Financial Statements and Financial Statement Schedule:
The following Consolidated Financial Statements of Chromcraft Revington are
included in this report on Form 10-K:
Page Reference
--------------
Consolidated Statements of Earnings for the years ended
December 31, 2000, 1999 and 1998 F-1
Consolidated Balance Sheets at December 31, 2000 and 1999 F-2
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2000, 1999 and 1998 F-3
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 F-4
Notes to Consolidated Financial Statements F-5
Independent Auditors' Report F-13
Quarterly Financial Information (unaudited) F-14
The following consolidated financial statement schedule of
Chromcraft Revington is included in response to Item 14(d):
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been omitted.
(a) 3. Listing of Exhibits
(3)(i) Certificate of Incorporation of the Registrant, as amended, filed
as Exhibit No. 3.1 to Form S-1, registration number 33-45902, as
filed with the Securities and Exchange Commission on February 21,
1992, is incorporated herein by reference.
(3)(ii) By-laws of the Registrant, filed as Exhibit No. 3.2 to Form S-1,
registration number 33-45902, as filed with the Securities and
Exchange Commission on February 21, 1992, is incorporated herein
by reference.
(4.7) Credit Agreement, dated December 20, 2000, among the Registrant,
the Banks party thereto and Bank One, Indiana, N.A., as agent for
the Banks (filed herewith).
(10.1) Lease, dated February 15, 1962, between the Board of Supervisors
of Tate County, Mississippi as Landlord and Chromcraft
Corporation as Tenant, filed as Exhibit No. 10.1 to Form S-1,
12
registration number 33-45902, as filed with the Securities and
Exchange Commission on February 21, 1992, is incorporated herein
by reference.
(10.3) Form of Registration Rights Agreement between the Registrant and
Court Square Capital Limited, filed as Exhibit No. 10.3 to Form
S-1, registration number 33-45902, as filed with the Securities
and Exchange Commission on February 21, 1992, is incorporated
herein by reference.
(10.12) Contract, dated April 3, 1961, between the City of Senatobia,
Tate County, Mississippi, the Board of Supervisors of Tate
County, Mississippi and Chromcraft Corporation, filed as Exhibit
No. 10.12 to Form S-1, Pre-Effective Amendment No. 1,
registration number 33-45902, as filed with the Securities and
Exchange Commission on March 17, 1992, is incorporated herein by
reference.
(10.13) Lease, dated September 9, 1966, between the Board of Supervisors
of Tate County, Mississippi as Landlord and Chromcraft
Corporation as Tenant, filed as Exhibit No. 10.13 to Form S-1,
Pre-Effective Amendment No. 1, registration number 33-45902, as
filed with the Securities and Exchange Commission on March 17,
1992, is incorporated herein by reference.
(10.14) Contract, dated May 5, 1969, between the Board of Supervisors of
Tate County, Mississippi and Chromcraft Corporation, filed as
Exhibit No. 10.14 to Form S-1, Pre-Effective Amendment No. 1,
registration number 33-45902, as filed with the Securities and
Exchange Commission on March 17, 1992, is incorporated herein by
reference.
(10.15) Contract and Lease Agreement, dated April 17, 1972, between Tate
County, Mississippi as Landlord and Chromcraft Corporation as
Tenant, filed as Exhibit No. 10.15 to Form S-1, Pre-Effective
Amendment No. 1, registration number 33-45902, as filed with the
Securities and Exchange Commission on March 17, 1992, is
incorporated herein by reference.
Executive Compensation Plans and Arrangements
---------------------------------------------
(10.4) Chromcraft Revington, Inc. 1992 Stock Option Plan, as amended,
filed as Exhibit No. 10.4 to Form 10-Q for the quarter ended June
27, 1998, is incorporated herein by reference.
(10.51) Chromcraft Revington, Inc. Short Term Executive Incentive Plan,
effective January 1, 1998, filed as Exhibit No. 10.51 to Form
10-K for the year ended December 31, 1998, is incorporated herein
by reference.
(10.55) Chromcraft Revington, Inc. Long Term Executive Incentive Plan,
effective January 1, 2000, filed as Exhibit 10.55 to Form 10-Q
for the quarter ended July 1, 2000, is incorporated herein by
reference.
(10.6) Chromcraft Revington Directors Deferred Compensation Plan,
effective January 1, 1999, filed as Exhibit 10.6 to Form 10-K
for the year ended December 31, 1998, is incorporated herein by
reference.
(10.7) Chromcraft Revington, Inc. Supplemental Executive Retirement
Plan, as amended and restated, effective December 3, 1998, filed
as Exhibit 10.7 to Form 10-K for the year ended December 31,
1998, is incorporated herein by reference.
13
(10.75) Supplemental Executive Retirement Plan Trust Agreement, dated
April 16, 1993, between the Registrant and Bank One, Indianapolis,
National Association, filed as Exhibit No. 10.75 to Form 10-Q for
the quarter ended July 3, 1993, is incorporated herein by
reference.
(10.8) Employment Agreement, dated March 31, 1992, between the
Registrant and Michael E. Thomas, filed as Exhibit No. 10.8 to
Form 10-K for the year ended December 31, 1992, is incorporated
herein by reference.
(10.85) Supplemental Retirement Benefits Agreement, dated August 21, 1992,
between the Registrant and Michael E. Thomas, filed as Exhibit No.
10.85 to Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
-----------------------
(21.1) Subsidiaries of the Registrant (filed herewith).
(23.1) Consent of Independent Auditors (filed herewith).
(24.1) Powers of Attorney (filed herewith).
(27.0) Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 2000.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this report.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Chromcraft Revington, Inc. has duly caused this annual report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
Chromcraft Revington, Inc.
----------------------------
(Registrant)
Date: March 2, 2001 By: /s/ Michael E. Thomas
------------- ----------------------------
Michael E. Thomas, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Chromcraft
Revington, Inc. and in the capacities and on the date indicated.
Signatures Title Date
---------------------- -------------------------- -------------
/s/ Michael E. Thomas President, Chief Executive March 2, 2001
---------------------- Officer and Director -------------
Michael E. Thomas
/s/ Frank T. Kane Vice President - Finance March 2, 2001
---------------------- (principal accounting and -------------
Frank T. Kane financial officer)
*David L. Kolb Director
----------------------
David L. Kolb
*Larry P. Kunz Director
----------------------
Larry P. Kunz
*M. Saleem Muqaddam Director
----------------------
M. Saleem Muqaddam
*Warren G. Wintrub Director
----------------------
Warren G. Wintrub
By: /s/ Michael E. Thomas March 2, 2001
------------------------- -------------
Michael E. Thomas,
Attorney-in-fact*
15
Consolidated Statements of Earnings
Chromcraft Revington, Inc.
(In thousands, except per share data)
Year Ended December 31,
-----------------------------------
2000 1999 1998
--------- --------- ---------
Sales $ 259,402 $ 245,385 $ 236,744
Cost of sales 197,165 188,411 176,988
--------- --------- ---------
Gross margin 62,237 56,974 59,756
Selling, general and administrative expenses 34,901 34,340 31,964
--------- --------- ---------
Operating income 27,336 22,634 27,792
Interest expense 2,008 988 739
--------- --------- ---------
Earnings before income tax expense 25,328 21,646 27,053
Income tax expense 9,878 8,572 10,794
--------- --------- ---------
Net earnings $ 15,450 $ 13,074 $ 16,259
========= ========= =========
Earnings per share of common stock
Basic $ 1.59 $ 1.25 $ 1.46
Diluted $ 1.57 $ 1.22 $ 1.41
Shares used in computing earnings per share
Basic 9,727 10,448 11,137
Diluted 9,847 10,720 11,533
See accompanying notes to the consolidated financial statements
F-1
Consolidated Balance Sheets
Chromcraft Revington, Inc.
(In thousands, except share data)
December 31,
----------------------
2000 1999
--------- ---------
Assets
Cash $ 441 $ 1,148
Accounts receivable, less allowances
of $1,253 and $1,266 25,552 29,574
Inventories 55,379 50,450
Other assets 3,447 3,642
--------- ---------
Current assets 84,819 84,814
Property, plant and equipment, at cost, less
accumulated depreciation 44,747 44,480
Goodwill and tradenames, less accumulated
amortization of $9,181 and $7,933 29,484 28,932
Other assets 1,042 909
--------- ---------
Total assets $ 160,092 $ 159,135
========= =========
Liabilities and Stockholders' Equity
Accounts payable $ 6,474 $ 8,200
Accrued liabilities 13,694 15,851
Revolving credit facility - 26,700
--------- ---------
Current liabilities 20,168 50,751
Revolving credit facility 19,200 -
Deferred compensation 5,998 5,824
Other long term liabilities 4,481 2,790
--------- ---------
Total liabilities 49,847 59,365
--------- ---------
Stockholders' equity
Common stock, $.01 par value, 20,000,000 shares
authorized 10,949,048 and 10,939,048 shares issued 109 109
Capital in excess of par value 10,385 10,274
Retained earnings 116,301 100,851
--------- ---------
126,795 111,234
Less cost of common shares in treasury, 1,375,800
shares in 2000 and 806,900 shares in 1999 (16,550) (11,464)
--------- ---------
Total stockholders' equity 110,245 99,770
--------- ---------
Total liabilities and stockholders' equity $ 160,092 $ 159,135
========= =========
See accompanying notes to the consolidated financial statements
F-2
Consolidated Statements of Stockholders' Equity
Chromcraft Revington, Inc.
(In thousands, except share data)
Total
Capital in Stock-
Common Excess of Retained Treasury holders'
Stock Par Value Earnings Stock Equity
--------- --------- --------- --------- ---------
Balance at January 1, 1998 $ 114 $ 19,274 $ 71,518 $ - $ 90,906
Repurchase and cancellation
of stock (590,548 shares) (6) (10,190) (10,196)
Exercise of stock options
(17,800 shares) - 148 148
Net earnings 16,259 16,259
--------- --------- --------- --------- ---------
Balance at December 31, 1998 108 9,232 87,777 - 97,117
Repurchase and cancellation
of stock (38,600 shares) - (615) (615)
Exercise of stock options
(181,860 shares) 1 1,657 1,658
Purchase of treasury stock
(806,900 shares) (11,464) (11,464)
Net earnings 13,074 13,074
--------- --------- --------- --------- ---------
Balance at December 31, 1999 109 10,274 100,851 (11,464) 99,770
Exercise of stock options
(10,000 shares) - 111 111
Purchase of treasury stock
(568,900 shares) (5,086) (5,086)
Net earnings 15,450 15,450
--------- --------- --------- --------- ---------
Balance at December 31, 2000 $ 109 $ 10,385 $ 116,301 $ (16,550) $ 110,245
========= ========= ========= ========= =========
See accompanying notes to the consolidated financial statements
F-3
Consolidated Statements of Cash Flows
Chromcraft Revington, Inc.
(In thousands)
Year Ended December 31,
-----------------------------------
2000 1999 1998
--------- --------- ---------
Operating Activities
Net earnings $ 15,450 $ 13,074 $ 16,259
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 5,855 4,947 4,534
Deferred income taxes 347 531 893
Changes in assets and liabilities, net
of effects of acquired company
Accounts receivable 4,022 1,435 21
Inventories (4,929) (1,831) (2,958)
Accounts payable (1,726) (4,030) (1,511)
Accrued liabilities (2,157) 72 293
Other (215) 559 (546)
--------- --------- ---------
Cash provided by operating activities 16,647 14,757 16,985
--------- --------- ---------
Investing Activities
Investment in acquired company - (8,525) -
Capital expenditures (4,953) (3,630) (3,388)
Proceeds from disposals of property, plant and equipment 74 1,184 51
--------- --------- ---------
Cash used in investing activities (4,879) (10,971) (3,337)
--------- --------- ---------
Financing Activities
Net borrowing (repayment) under revolving credit facility (7,500) 21,300 (3,600)
Refinance indebtedness of acquired company - (13,517) -
Repurchase of common stock (5,086) (12,079) (10,196)
Proceeds from exercise of stock options 111 1,658 148
--------- --------- ---------
Cash used in financing activities (12,475) (2,638) (13,648)
--------- --------- ---------
Increase (decrease) in cash (707) 1,148 -
Cash at beginning of the year 1,148 - -
--------- --------- ---------
Cash at end of the year $ 441 $ 1,148 $ -
========= ========= =========
See accompanying notes to the consolidated financial statements
F-4
Notes to Consolidated Financial Statements
Chromcraft Revington, Inc.
December 31, 2000
Note 1. Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of Chromcraft
Revington, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Chromcraft Revington manufactures and sells residential and commercial
furniture. Products are sold primarily through furniture dealers throughout
the United States and Canada. Chromcraft Revington has several operating
segments which are aggregated into one reportable segment, in accordance with
Financial Accounting Standards Board Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information."
Use of Estimates
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
All inventories (materials, labor and overhead) are valued at the lower of
cost or market. Inventories valued using the last-in, first-out (LIFO) basis
represent approximately 61% and 64% of total inventories at December 31, 2000
and 1999, respectively. Remaining inventories are valued using the first-in,
first-out (FIFO) basis.
Property, Plant and Equipment
Property, plant and equipment is stated on the basis of cost. Depreciation is
computed principally by the straight-line method for financial reporting
purposes and by accelerated methods for tax purposes.
Revenue Recognition
Revenue from sales is recognized when the goods are shipped to the customer.
Intangibles
Intangible assets are stated on the basis of cost. The excess of purchase
price over the fair value of net assets acquired (goodwill) and tradenames are
being amortized on a straight-line basis over periods ranging from 15 to 40
years. Chromcraft Revington reviews the carrying value of goodwill whenever
changes in circumstances indicate that the carrying amount may not be
recoverable. When factors indicate that the recoverability of goodwill should
be evaluated, Chromcraft Revington uses an estimate of the undiscounted cash
flows of the acquired businesses in determining whether an impairment loss is
required.
F-5
Deferred Income Taxes
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
Earnings per Share
Basic earnings per share is calculated based on the average number of common
shares outstanding. Diluted earnings per share include dilutive potential
common shares (stock options).
Stock Options
Chromcraft Revington applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations in
accounting for stock options and discloses the fair value of options granted
as permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."
Financial Instruments
The carrying amounts reported in the balance sheets for accounts receivable,
accounts payable and borrowings under a bank revolving credit facility
approximate their fair values. Concentration of credit risk with respect to
trade accounts receivable is limited due to the large number of entities
comprising Chromcraft Revington's customer base.
Note 2. Purchase Offer from Court Square Capital Limited
On December 22, 2000, Chromcraft Revington received a proposal from Court
Square Capital Limited ("Court Square Capital"), a unit of Citigroup, under
which the holders of Chromcraft Revington's publicly traded shares would
receive cash of $10.30 per share in a transaction to take Chromcraft Revington
private. The offer is contingent upon the execution of a definitive merger
agreement, confirmatory due diligence and the approval of Chromcraft
Revington's board of directors and stockholders. Court Square Capital owns
5,695,418 shares, or 59.5%, of Chromcraft Revington's common stock at
December 31, 2000. An independent committee of Chromcraft Revington's board
of directors is evaluating the proposal and has engaged ING Barings, LLC as its
financial advisor to assist the committee in regard to the proposal.
Note 3. Acquisition of Korn Industries, Incorporated
On September 2, 1999, CRI Corporation-Sumter, a wholly-owned subsidiary of
Chromcraft Revington, Inc., acquired all of the outstanding common stock of
Korn Industries, Incorporated ("Korn Industries") for $8,525,000 in cash
(including acquisition-related expenses) and the assumption of Korn Industries'
liabilities. Korn Industries is headquartered in Sumter, South Carolina and
manufactures and sells bedroom and dining room furniture through its Sumter
Cabinet Company division. The operations of Korn Industries are included in
the Consolidated Statements of Earnings commencing on September 2, 1999. The
transaction was accounted for as a purchase and the purchase price has been
allocated to assets acquired and liabilities assumed based on their fair
F-6
market values at the date of acquisition. The purchase price allocation was
finalized during 2000, which resulted in an increase in goodwill of $1,800,000.
Goodwill and other intangibles are being amortized on a straight-line basis
over periods ranging from 15 to 25 years.
The following unaudited pro forma results of operations for the year ended
December 31, 1999 give effect to the Korn Industries acquisition as if it had
occurred on January 1, 1999. The unaudited pro forma results of operations
for the year ended December 31, 1998 combine the operating results of Korn
Industries for the fiscal year ended November 28, 1998 and Chromcraft
Revington's operating results for the year ended December 31, 1998 and give
effect to the Korn Industries acquisition as if it had occurred at the
beginning of the period.
(In thousands,
except per share data)
----------------------
1999 1998
--------- ---------
Sales $ 281,168 $ 291,395
Net earnings 11,280 14,310
Earnings per share of common stock
Basic 1.08 1.28
Diluted 1.05 1.24
The pro forma information is presented for comparative purposes only and is
not necessarily indicative of the operating results that would have occurred
had the acquisition been consummated as of the above dates, nor is it
necessarily indicative of future operating results.
Note 4. Inventories
Inventories at December 31, 2000 and 1999 consisted of the following:
(In thousands)
----------------------
2000 1999
--------- ---------
Raw materials $ 17,729 $ 18,521
Work-in-process 9,083 8,069
Finished goods 30,870 25,866
--------- ---------
Inventories at FIFO cost 57,682 52,456
LIFO reserve (2,303) (2,006)
--------- ---------
$ 55,379 $ 50,450
========= =========
Note 5. Property, Plant and Equipment
Property, plant and equipment at December 31, 2000 and 1999 consisted of the
following:
(In thousands)
----------------------
2000 1999
--------- ---------
Land $ 2,231 $ 2,208
Buildings and improvements 34,168 32,869
Machinery and equipment 50,257 46,986
Leasehold improvements 862 862
Construction in progress 391 239
--------- ---------
87,909 83,164
Less accumulated depreciation and amortization (43,162) (38,684)
--------- ---------
$ 44,747 $ 44,480
========= =========
F-7
Note 6. Accrued Liabilities
Accrued liabilities at December 31, 2000 and 1999 consisted of the following:
(In thousands)
----------------------
2000 1999
--------- ---------
Employee benefit plans $ 4,450 $ 5,434
Salaries, wages and commissions 1,586 1,907
Vacation and holiday pay 1,035 1,162
Workers' compensation plans 1,013 1,451
Deferred income taxes 1,018 562
Other accrued liabilities 4,592 5,335
--------- ---------
$ 13,694 $ 15,851
========= =========
Note 7. Income Taxes
Components of the provision for income taxes for the years ended December 31,
2000, 1999 and 1998 were as follows:
(In thousands)
-----------------------------------
2000 1999 1998
--------- --------- ---------
Current:
Federal $ 8,420 $ 7,029 $ 8,666
State 1,111 1,012 1,235
--------- --------- ---------
9,531 8,041 9,901
--------- --------- ---------
Deferred:
Federal 257 502 738
State 90 29 155
--------- --------- ---------
347 531 893
--------- --------- ---------
Total provision for income taxes $ 9,878 $ 8,572 $ 10,794
========= ========= =========
A reconciliation of the provision for income taxes included in the Consolidated
Statements of Earnings and the amount computed by applying the U.S. Federal
income tax rate for the years ended December 31, 2000, 1999 and 1998 is
summarized below:
(In thousands)
-----------------------------------
2000 1999 1998
--------- --------- ---------
Tax expense, at U.S. statutory rate $ 8,865 $ 7,577 $ 9,469
State taxes, net of federal benefit 729 682 1,030
Non-deductible amortization of goodwill 321 253 222
Other, net (37) 60 73
--------- --------- ---------
Total provision for income taxes $ 9,878 $ 8,572 $ 10,794
========= ========= =========
F-8
The tax effects of temporary differences that give rise to significant
portions of net deferred tax assets (liabilities) at December 31, 2000 and
1999 are summarized below:
(In thousands)
----------------------
2000 1999
--------- ---------
Deferred tax assets attributable to:
Accounts receivable $ 566 $ 794
Accrued vacation and holiday pay 373 486
Deferred compensation 2,680 2,965
Contingent liabilities 1,200 -
Net operating loss carryforwards 2,445 3,407
Other 1,981 2,209
--------- ---------
Total gross deferred tax assets 9,245 9,861
--------- ---------
Deferred tax liabilities attributable to:
Inventories (3,443) (3,744)
Property, plant and equipment (5,656) (5,630)
Other (1,272) (1,266)
--------- ---------
Total gross deferred tax liabilities (10,371) (10,640)
--------- ---------
Net deferred tax liabilities $ (1,126) $ (779)
========= =========
Balance sheet classifications of deferred taxes at December 31, 2000
and 1999 were as follows:
(In thousands)
----------------------
2000 1999
--------- ---------
Deferred tax liability, current $ (1,018) $ (562)
Deferred tax liability, noncurrent (108) (217)
--------- ---------
Net deferred tax liability $ (1,126) $ (779)
========= =========
In connection with the acquisitions of Cochrane Furniture and Korn Industries,
Chromcraft Revington acquired federal and state net operating loss
carryforwards ("NOL's") of $5,173,000 and $8,174,000, respectively, with
expiration dates through 2010 and 2018, respectively. The use of the NOL's is
limited to the future taxable earnings of the acquired companies.
Note 8. Revolving Credit Facility
In December 2000, Chromcraft Revington entered into an unsecured revolving
loan facility (the "Facility") with a group of banks that allows it to borrow
up to $47,500,000 for working capital requirements, capital expenditures and
acquisitions. At December 31, 2000, Chromcraft Revington had $26,051,000 in
availability under the Facility. The interest rate under the Facility is
determined at the time of borrowing, at Chromcraft Revington's option, at the
higher of the bank prime lending rate or Fed Funds rate plus .5%, or a rate
based on the Fed Funds rate or the London Interbank Offered Rate (LIBOR). The
weighted average interest rate on borrowings outstanding as of December 31, 2000
and 1999 was 7.42% and 5.12%, respectively. There is a commitment fee ranging
from .125% to .225% (depending on a leverage ratio) on the unused portion of
the credit line. Chromcraft Revington had outstanding letters of credit under
the Facility of $2,249,000 and $2,432,000 at December 31, 2000 and 1999,
respectively. The Facility expires December 31, 2005.
The Facility requires compliance with certain financial loan covenants related
to net worth, interest and fixed charge coverages and debt leverage. At
December 31, 2000, unrestricted retained earnings available for dividends were
$31,911,000.
F-9
Note 9. Earnings Per Share of Common Stock
Weighted average shares used in the calculation of diluted earnings per share
included dilutive potential common shares (stock options) of approximately
120,000, 272,000 and 396,000 for the years ended December 31, 2000, 1999 and
1998, respectively.
Certain stock options to purchase shares of common stock were outstanding
during 2000, 1999 and 1998, but were not included in the computation of
diluted earnings per share because the options' exercise prices were greater
than the average market price of the common shares during those periods and,
therefore, their effect would be antidilutive. Options excluded from the
computation of diluted earnings per share and their weighted average exercise
prices at December 31, 2000, 1999 and 1998 were 376,060 shares at $13.48,
138,426 shares at $16.85 and 58,000 shares at $19.78, respectively.
Note 10. Stockholders' Equity
Chromcraft Revington is authorized to issue up to 100,000 shares of $1.00 par
value preferred stock, none of which is outstanding.
Chromcraft Revington effected a two-for-one stock split in the form of a 100%
stock dividend to stockholders of record on May 27, 1998. The additional
shares were distributed to stockholders on June 10, 1998. All references to
the number of shares outstanding and per share amounts, where applicable, in
the consolidated financial statements and notes reflect the stock split.
Chromcraft Revington has entered into a Registration Rights agreement dated
April 23, 1992 (the "Agreement") between Chromcraft Revington and Court Square
Capital Limited, which owned 5,695,418 shares, or 59.5%, of Chromcraft
Revington's outstanding common stock at December 31, 2000. The Agreement
permits Court Square Capital Limited and transferees, as defined, to request
certain registration rights under the Securities Act of 1933 for all or part
of its shares of common stock under certain conditions. In connection with
such registrations as may occur, Chromcraft Revington will be obligated for
the payment of all registration expenses incurred in the performance of, or
compliance with, this Agreement, subject to certain limitations set forth
therein.
Note 11. Employee Benefit Plans
Chromcraft Revington sponsors a number of tax-qualified defined contribution
retirement and savings plans. Employees may be eligible to participate in one
or more of these plans. Company contributions to these plans are based on
either a percentage of an employee's compensation or a matching portion of the
employee's contributions. The cost of these plans was $1,235,000 in 2000,
$1,299,000 in 1999 and $1,188,000 in 1998.
Chromcraft Revington also provides supplemental retirement benefits and "make
up" benefits to key executives of Chromcraft Revington whose benefits are
reduced by Internal Revenue Service Code restrictions. Contributions and
expenses under these arrangements were $198,000 in 2000, $390,000 in 1999 and
$338,000 in 1998.
Note 12. Stock Options
Chromcraft Revington's 1992 Stock Option Plan, as amended, (the "Plan")
provides for the granting of either incentive stock options ("ISO's") or stock
options which do not qualify as incentive stock options ("non-ISO's"). The
total number of shares of common stock which may be issued under stock options
granted pursuant to the Plan is 1,800,000 shares. ISO's granted under the Plan
vest over no greater than a 10-year period, and are granted at exercise prices
no less than the fair market value of Chromcraft Revington's common shares as
of the date of grant.
F-10
Non-ISO's vest and are at exercise prices as determined by the compensation
committee of the Board of Directors. At December 31, 2000 and 1999, there
were 623,730 and 605,606 shares, respectively, available for future grants.
The estimated per share weighted average fair value of stock options granted
during 2000, 1999 and 1998 was $3.38, $6.02 and $7.85, respectively, on the
date of grant. The fair value of stock options on the date of grant was
estimated using the Black-Scholes model with the following weighted average
assumptions:
2000 1999 1998
--------- --------- ---------
Expected life (years) 6 6 6
Interest rate 6.8% 5.0% 5.7%
Volatility 27.5% 27.2% 27.8%
The following table summarizes the pro forma effects assuming compensation
cost for such awards had been recorded based upon the estimated fair value:
(In thousands, except per share data)
--------------------------------------------------------------------------
2000 1999 1998
---------------------- ---------------------- ----------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
--------- --------- --------- --------- --------- ---------
Net earnings $ 15,450 $ 15,232 $ 13,074 $ 12,622 $ 16,259 $ 15,875
Earnings per share
of common stock
Basic 1.59 1.57 1.25 1.21 1.46 1.43
Diluted 1.57 1.55 1.22 1.18 1.41 1.38
A summary of Chromcraft Revington's stock option activity and related
information for the three years ended December 31, 2000 follows:
Weighted
Average
Number Exercise
of Shares Price
--------- ---------
1998
Outstanding at beginning of year 959,542 $ 8.68
Granted 58,000 $ 19.78
Exercised (17,800) $ 7.25
Outstanding at end of year 999,742 $ 9.35
Exercisable 861,310 $ 8.38
1999
Granted 47,064 $ 16.00
Exercised (181,860) $ 6.98
Canceled (9,500) $ 18.32
Outstanding at end of year 855,446 $ 10.12
Exercisable 791,228 $ 9.74
2000
Granted 54,202 $ 8.08
Exercised (10,000) $ 11.00
Canceled (72,326) $ 13.15
Outstanding at end of year 827,322 $ 9.71
Exercisable 795,322 $ 9.56
F-11
Significant option groups outstanding at December 31, 2000 and related weighted
average price and remaining life information follows:
Options Outstanding Options Exercisable
---------------------- ----------------------
Grant Number Exercise Number Exercise Remaining
Date of Shares Price of Shares Price Life (Years)
--------- --------- --------- --------- --------- -----------
4-15-92 310,960 $ 5.50 310,960 $ 5.50 1.3
2-19-93 86,100 $ 9.50 86,100 $ 9.50 2.1
1-11-94 98,000 $ 11.63 98,000 $ 11.63 3.0
All other 332,262 $ 13.14 300,262 $ 13.10 6.5
Note 13. Supplemental Cash Flow Information
Interest paid during the years ended December 31, 2000, 1999 and 1998 was
$2,104,000, $873,000 and $774,000, respectively. Income taxes paid during the
years ended December 31, 2000, 1999 and 1998 were $8,247,000, $7,334,000 and
$10,062,000, respectively.
Note 14. Rental Commitments
Chromcraft Revington leases certain showroom facilities and transportation
equipment under non-cancelable operating leases. The future minimum lease
payments under non-cancelable leases for the years ending December 31, 2001,
2002, 2003, 2004 and 2005 are $1,386,000, $1,177,000, $1,049,000, $822,000 and
$37,000, respectively. It is expected that, in the normal course of business,
leases that expire will be renewed or replaced.
Rental expense was $1,772,000, $1,825,000 and $1,919,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.
F-12
Independent Auditors' Report
The Board of Directors and Stockholders
Chromcraft Revington, Inc.:
We have audited the consolidated financial statements of Chromcraft Revington,
Inc. and subsidiaries as listed in item 14(a) (1) and (2). In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in item 14(a) (1) and (2). These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Chromcraft
Revington, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Indianapolis, Indiana
January 31, 2001
F-13
Quarterly Financial Information (unaudited)
Chromcraft Revington, Inc.
(In thousands, except per share data)
-------------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- ---------
2000
Sales $ 73,740 $ 65,667 $ 62,062 $ 57,933 $ 259,402
Gross margin 18,115 16,094 14,050 13,978 62,237
Operating income 8,476 6,973 5,037 6,850 27,336
Net earnings 4,859 3,924 2,732 3,935 15,450
Earnings per share
of common stock
Basic .49 .40 .28 .41 1.59
Diluted .49 .40 .28 .41 1.57
1999
Sales $ 61,898 $ 55,881 $ 59,279 $ 68,327 $ 245,385
Gross margin 15,515 13,847 13,527 14,085 56,974
Operating income 7,333 6,182 5,822 3,297 22,634
Net earnings 4,368 3,692 3,365 1,649 13,074
Earnings per share
of common stock
Basic .41 .35 .33 .16 1.25
Diluted .39 .34 .32 .16 1.22
--------------------
Operating results for the quarter ended December 31, 1999 include a non-
recurring pre-tax charge of $1.5 million ($.09 per share on a diluted basis)
for employee termination costs, the writing down of discontinued inventory and
other related costs at Chromcraft Revington's Chromcraft subsidiary.
F-14
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Chromcraft Revington, Inc.
(In thousands)
Additions
----------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Classification of Period Expenses Accounts Deductions of Year
-------------- --------- --------- --------- ---------- ---------
Year ended December 31, 2000
Allowance for doubtful
accounts $ 1,266 $ 1,568 $ - $ (1,581)(a) $ 1,253
Year ended December 31, 1999
Allowance for doubtful
accounts $ 1,211 $ 246 $ 277(b) $ (468)(a) $ 1,266
Year ended December 31, 1998
Allowance for doubtful
accounts $ 1,462 $ 328 $ - $ (579)(a) $ 1,211
(a) Represents charge-offs, net of recoveries, to the allowance for doubtful
accounts.
(b) Represents the allowance for doubtful accounts associated with the Korn
Industries acquisition.
S-1
EXHIBIT (4.7)
CREDIT AGREEMENT
among
CHROMCRAFT REVINGTON, INC.
and
BANK ONE, INDIANA, N.A.,
NATIONAL CITY BANK OF INDIANA
SUNTRUST BANK
THE NORTHERN TRUST COMPANY
and
BANK ONE, INDIANA, N.A., AS AGENT
Dated as of December 20, 2000
TABLE OF CONTENTS
Page
----
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Rules of Construction . . . . . . . . . . . . . . . . . . . . 12
1.3. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2. Credit . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.1. Revolving Commitment . . . . . . . . . . . . . . 12
2.1.2. Cash Management Line/Mandatory Funding . . . . . 13
2.2. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2.1. Revolving Commitment . . . . . . . . . . . . . . 13
2.2.2. Cash Management Line . . . . . . . . . . . . . . 14
2.2.3. General . . . . . . . . . . . . . . . . . . . . 14
2.3. Payments of Principal and Interest . . . . . . . . . . . . . 14
2.3.1. Revolving Commitment . . . . . . . . . . . . . . 14
2.3.2. Cash Management Line . . . . . . . . . . . . . . 15
2.3.3. Method of Payment . . . . . . . . . . . . . . . 15
2.3.4. Banking Day . . . . . . . . . . . . . . . . . . 15
2.4. Method of Advance . . . . . . . . . . . . . . . . . . . . . . 15
2.4.1. Revolving Commitment . . . . . . . . . . . . . . 15
2.4.2. Cash Management Line . . . . . . . . . . . . . . 16
2.4.3. General . . . . . . . . . . . . . . . . . . . . 17
2.5. Procedures for Electing Optional Rates . . . . . . . . . . . 17
2.6. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.6.1. Commitment Fee - Revolving Commitment . . . . . 19
2.6.2. Agent Fee . . . . . . . . . . . . . . . . . . . 19
2.7. Reductions and Increases of Revolving Commitment . . . . . . 19
2.7.1. Reductions . . . . . . . . . . . . . . . . . . . 19
2.7.2. Increases . . . . . . . . . . . . . . . . . . . 20
2.8. Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . 20
2.9. Issuance of Letters of Credit . . . . . . . . . . . . . . . . 21
2.10. Letters of Credit Participation and Fees . . . . . . . . . . 22
2.11. Reimbursement of Letters of Credit . . . . . . . . . . . . . 23
2.12. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 24
2.13. Lending Installations . . . . . . . . . . . . . . . . . . . . 24
PAGE
----
SECTION 3. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4. Representations and Warranties . . . . . . . . . . . . . 25
4.1. Due Organization . . . . . . . . . . . . . . . . . . . . . . 25
4.2. Due Qualification . . . . . . . . . . . . . . . . . . . . . . 25
4.3. Corporate Power . . . . . . . . . . . . . . . . . . . . . . . 25
4.4. Corporate Authority . . . . . . . . . . . . . . . . . . . . . 25
4.5. Financial Statements . . . . . . . . . . . . . . . . . . . . 26
4.6. No Material Adverse Change . . . . . . . . . . . . . . . . . 26
4.7. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 26
4.8. Binding Obligations . . . . . . . . . . . . . . . . . . . . . 26
4.9. Marketable Title . . . . . . . . . . . . . . . . . . . . . . 26
4.10. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 26
4.11. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.12. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.13. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.14. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.15. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . 27
4.16. Contracts of Surety . . . . . . . . . . . . . . . . . . . . . 27
4.17. Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.18. Compliance with Law . . . . . . . . . . . . . . . . . . . . . 28
4.19. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . 28
4.20. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . 28
4.21. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.22. Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.23. Regulation . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.24. Environmental Compliance . . . . . . . . . . . . . . . . . . 29
4.25. General . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . 29
5.1.1. Financial Reporting . . . . . . . . . . . . . . 29
5.1.2. Good Standing . . . . . . . . . . . . . . . . . 31
5.1.3. Taxes, Etc . . . . . . . . . . . . . . . . . . 31
5.1.4. Maintain Properties . . . . . . . . . . . . . . 31
5.1.5. Insurance . . . . . . . . . . . . . . . . . . . 31
5.1.6. Books and Records . . . . . . . . . . . . . . . 31
5.1.7. Reports . . . . . . . . . . . . . . . . . . . . 32
5.1.8. Licenses . . . . . . . . . . . . . . . . . . . 32
5.1.9. Notice of Material Adverse Change . . . . . . . 32
5.1.10. Conduct of Business . . . . . . . . . . . . . . 32
PAGE
----
5.1.11. Compliance with Laws . . . . . . . . . . . . . 32
5.1.12. Use of Proceeds . . . . . . . . . . . . . . . . 32
5.1.13. Loan Payments . . . . . . . . . . . . . . . . . 32
5.1.14. Adjusted Consolidated Tangible Net Worth . . . 33
5.1.15. Consolidated Net Worth . . . . . . . . . . . . 33
5.1.16. Senior Leverage Ratio . . . . . . . . . . . . . 33
5.1.17. Fixed Charge Coverage Ratio . . . . . . . . . . 33
5.1.18. Notice of Environmental Matters . . . . . . . . 33
5.1.19. Banking Accounts . . . . . . . . . . . . . . . 34
5.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 34
5.2.1. Dispose of Property . . . . . . . . . . . . . . 34
5.2.2. Further Encumber . . . . . . . . . . . . . . . 34
5.2.3. Dividends . . . . . . . . . . . . . . . . . . . 34
5.2.4. Purchase Stock . . . . . . . . . . . . . . . . 34
5.2.5. Borrowings . . . . . . . . . . . . . . . . . . 35
5.2.6. Loans, Etc. . . . . . . . . . . . . . . . . . . 35
5.2.7. Guarantees . . . . . . . . . . . . . . . . . . 35
5.2.8. Merger, Acquisitions, Etc. . . . . . . . . . . 35
5.2.9. Change Name and Place of Business . . . . . . . 36
5.2.10. Accounting Policies . . . . . . . . . . . . . . 36
5.2.11. Change of Business . . . . . . . . . . . . . . 36
5.2.12. Benefit Plan . . . . . . . . . . . . . . . . . 36
SECTION 6. Conditions Precedent to Loans . . . . . . . . . . . . . . 37
6.1. Conditions to Initial Advance . . . . . . . . . . . . . . . . 37
6.1.1. Authorization . . . . . . . . . . . . . . . . . 37
6.1.2. Loan Documents . . . . . . . . . . . . . . . . 37
6.1.3. Guaranty . . . . . . . . . . . . . . . . . . . 37
6.1.4. Incumbency Certificates . . . . . . . . . . . . 37
6.1.5. Opinion of Counsel . . . . . . . . . . . . . . 37
6.1.6. UCC Searches . . . . . . . . . . . . . . . . . 37
6.1.7. Regulation U . . . . . . . . . . . . . . . . . 37
6.1.8. Compliance Certificate . . . . . . . . . . . . 37
6.1.9. Facility Fees . . . . . . . . . . . . . . . . . 38
6.1.10. Termination of Existing Credit Agreement . . . 38
6.1.11. Additional Documentation . . . . . . . . . . . 38
6.2. Conditions to Subsequent Advances . . . . . . . . . . . . . . 38
6.2.1. No Default . . . . . . . . . . . . . . . . . . 38
6.2.2. Representations and Warranties . . . . . . . . 38
6.2.3. Legal Matters . . . . . . . . . . . . . . . . . 38
6.2.4. Expenses . . . . . . . . . . . . . . . . . . . 38
PAGE
----
6.3. Special Conditions to Advances for Permitted Acquisitions . . 38
6.3.1. Written Requests . . . . . . . . . . . . . . . 38
6.3.2. Acquisition Documents . . . . . . . . . . . . . 39
6.3.3. Representations of Target's Financial
Statements . . . . . . . . . . . . . . . . . . 39
6.3.4. Expenses . . . . . . . . . . . . . . . . . . . 39
6.4. General . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7. Default . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2. Deposit to Secure Reimbursement Obligations . . . . . . . . . 42
8.3. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4. Preservation of Rights . . . . . . . . . . . . . . . . . . . 42
8.5. Actions by the Agent/Default Rate . . . . . . . . . . . . . . 42
SECTION 9. The Agent . . . . . . . . . . . . . . . . . . . . . . . . 43
9.1. Appointment; Nature of Relationship . . . . . . . . . . . . . 43
9.2. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3. General Immunity . . . . . . . . . . . . . . . . . . . . . . 43
9.4. No Responsibility for Loans, Recital, etc. . . . . . . . . . 43
9.5. Action on Instructions of Lenders . . . . . . . . . . . . . . 44
9.6. Employment of Agents and Counsel . . . . . . . . . . . . . . 44
9.7. Reliance on Documents; Counsel . . . . . . . . . . . . . . . 44
9.8. Agent's Reimbursement and Indemnification . . . . . . . . . . 44
9.9. Notice of Default . . . . . . . . . . . . . . . . . . . . . . 45
9.10. Rights as a Lender . . . . . . . . . . . . . . . . . . . . . 45
9.11. Lender Credit Decision . . . . . . . . . . . . . . . . . . . 45
9.12. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . 45
9.13. Delegation to Affiliates . . . . . . . . . . . . . . . . . . 46
SECTION 10. Benefit of Agreement; Assignment, Participations . . . . 46
10.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . 46
10.2. Participations . . . . . . . . . . . . . . . . . . . . . . . 47
10.2.1. Permitted Participants; Effect . . . . . . . . 47
10.2.2. Voting Rights . . . . . . . . . . . . . . . . . 47
10.2.3. Benefit of Setoff . . . . . . . . . . . . . . . 47
PAGE
----
10.3. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.3.1. Permitted Assignments . . . . . . . . . . . . . 48
10.3.2. Effect; Effective Date . . . . . . . . . . . . 48
10.4. Dissemination of Information . . . . . . . . . . . . . . . . 49
10.5. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11. General Provisions . . . . . . . . . . . . . . . . . . . 49
11.1. Waivers, Amendments and Remedies . . . . . . . . . . . . . . 49
11.2. Survival of Representations . . . . . . . . . . . . . . . . . 50
11.3. Governmental Regulation . . . . . . . . . . . . . . . . . . . 50
11.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.5. Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . 50
11.6. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.7. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 50
11.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.9. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 51
11.10. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 51
11.11. Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . 51
11.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 51
11.13. Incorporation by Reference . . . . . . . . . . . . . . . . . 52
11.14. Time of Essence . . . . . . . . . . . . . . . . . . . . . . . 52
11.15. No Joint Venture . . . . . . . . . . . . . . . . . . . . . . 52
11.16. Severability . . . . . . . . . . . . . . . . . . . . . . . . 52
11.17. Waiver of Setoff . . . . . . . . . . . . . . . . . . . . . . 52
11.18. Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.19. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . 52
11.20. Lenders Not in Control . . . . . . . . . . . . . . . . . . . 53
11.21. Additional Amounts Payable . . . . . . . . . . . . . . . . . 53
11.22. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.23. Application of Proceeds . . . . . . . . . . . . . . . . . . . 54
11.24. Foreign Lender Withholding Tax . . . . . . . . . . . . . . . 54
11.25. Replacement of Lenders . . . . . . . . . . . . . . . . . . . 55
11.26. Relationship of Parties; Mutual Release of Consequential
Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.27. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 55
Schedule I Lenders and Lenders' Revolving Commitments
Schedule II Permitted Encumbrances
Schedule 4.7 Subsidiaries
Schedule 4.10 Indebtedness
Exhibit A Compliance Certificate
Exhibit B Form of Revolving Note
Exhibit C Credit Note (Cash Management Line)
Exhibit D Form of Subsidiary Guaranty
Exhibit E Assignment Agreement
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT, dated as of the 20th day of December, 2000,
among CHROMCRAFT REVINGTON, INC., a Delaware corporation (the "Borrower"),
the Lenders party hereto as listed on Schedule I hereto, and BANK ONE,
INDIANA, N.A., a national banking association, as agent for the Lenders
hereunder (in such capacity, the "Agent"). The parties agree as follows:
SECTION 1
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Definitions
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1.1. Defined Terms. As used in this Agreement:
"Adjusted Consolidated Tangible Net Worth" means, on any date of
determination, the amount by which (a) Consolidated Net Worth exceeds
(b) the sum of (i) all assets which would be classified as intangible
assets under GAAP, including without limitation, goodwill (whether
representing the excess of cost over book value of assets acquired or
otherwise), patents, trademarks, trade names, copyrights, franchises,
operating permits, unamortized debt discount and expense, organization
costs, and research and development costs, (ii) minority interests in
subsidiaries, (iii) cash set apart and held in a sinking or other
similar fund established for the purpose of redemption or other
retirement of capital stock, (iv) to the extent not otherwise
deducted, reserves for depreciation, depletion, obsolescence and/or
amortization of properties and all other reserves or appropriations of
retained earnings which, in accordance with GAAP, should be
established in connection with the business conducted by Borrower and
(v) any revaluation or other write-up in book value of assets
subsequent to the date hereof.
"Adjusted LIBOR" means, for each LIBOR Loan, the rate per annum
(rounded up, if necessary, to the nearest 1/16%) determined by the
Agent to be equal to the quotient of (a) the LIBOR divided by (b) 1
minus the Reserve Requirement.
"Advance" means a disbursement of proceeds of the Loans.
"Affiliate" means, with respect to any Person, any other Person
(a) directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with, such Person,
and (b) that directly or indirectly owns more than Ten Percent (10%)
of any class of the voting securities or capital stock of or equity
interests in such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
other Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agent" means Bank One, Indiana, NA., in its capacity as agent
for the Lenders hereunder, and any successor Agent appointed pursuant
to this Agreement.
"Agreement" means this Credit Agreement, as amended from time to time.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Prime Rate for such day, and (ii) the sum of
the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Alternate Base Rate Loan" means any Loan when and to the extent
that the interest rate thereof is determined by reference to the
Alternate Base Rate.
"Applicable Margin" and "Applicable Fee" is determined by
reference to the following tables:
Applicable Margin
Applicable Margin for Federal Funds
Senior Leverage Ratio for LIBOR Loans Loans
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Equal to or greater than
2.00 to 1.00 1.125% 1.25%
Less than 2.00 to 1.00
but greater than or equal
to 1.50 to 1.00 .875% 1.00%
Less than 1.50 to 1.00
but greater than or equal
to 1.00 to 1.00 .75% .875%
Less than 1.00 to 1.00
but greater than or equal
to .50 to 1.00 .625% .75%
Less than .50 to 1.00 .50% .625%
Applicable Fee Applicable Fee
for Standby Letters for Commitment
Senior Leverage Ratio of Credit Fee
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Equal to or greater than
2.0 to 1.00 1.125% .225%
Less than 2.0 to 1.00 but
greater than or equal to
1.5 to 1.00 .875% .20%
Less than 1.50 to 1.00 but
greater than or equal to
1.00 to 1.00 .75% .175%
2
Less than 1.00 to 1.00 but
greater than or equal to
.50 to 1.00 .625% .15%
Less than .50 to 1.00 .50% .125%
The Applicable Margin and the Applicable Fee shall initially be
determined based on the Senior Leverage Ratio determined from
Borrower's most recent quarterly Financial Statements. Adjustments,
if any, to the Applicable Margin and the Applicable Fee shall be
effective five (5) Banking Days after the Agent has received
Borrower's Financial Statements delivered to the Lenders pursuant to
Section 5.1.1 hereof for the immediately preceding fiscal quarter. In
the event the Lenders have not received the required Financial
Statements pursuant to Section 5.1.1 hereof within the time periods
provided therein, the maximum Senior Leverage Ratio and the highest
Applicable Margin and Applicable Fee set forth in the foregoing tables
shall be conclusively presumed to be correct until five (5) Banking
Days after the applicable Financial Statements are so delivered. In
no event shall the Applicable Margin and the Applicable Fee be
adjusted downward if there exists a Default on the date on which such
downward adjustment would otherwise become effective until such time
as the Default has been cured, waived or ceases to exist. The
provisions of this definition are not intended to, and shall not be
construed to, authorize any violation by Borrower of Section 5.1.16
hereof or to constitute a waiver thereof or any commitment by the
Lenders to waive any violation by Borrower of Section 5.1.16 hereof.
"Authorized Officer" means any officer or employee of Borrower
whose authority to perform acts to be performed only by an Authorized
Officer under the terms of this Agreement are evidenced by (a) a
certified copy of an appropriate resolution of the Board of Directors
of Borrower, or (b) a written authorization specifying an employee of
Borrower signed by an Authorized Officer.
"Bank One" means Bank One, Indiana, N.A., a national banking<